Intrinsic value of Jean Coutu Group (PJC) Inc. (The) Class - PJC-A

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$20.22

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$20.22

 
Intrinsic value

$15.98

 
Up/down potential

-21%

 
Rating

sell

 
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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of PJC-A stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 3.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  1.46
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  2,855
  2,912
  2,979
  3,056
  3,142
  3,237
  3,341
  3,455
  3,578
  3,711
  3,853
  4,006
  4,168
  4,341
  4,525
  4,721
  4,928
  5,147
  5,378
  5,623
  5,881
  6,154
  6,441
  6,744
  7,064
  7,400
  7,754
  8,127
  8,519
  8,931
  9,365
Variable operating expenses, $m
 
  2,603
  2,663
  2,731
  2,808
  2,893
  2,987
  3,088
  3,198
  3,317
  3,444
  3,576
  3,721
  3,876
  4,040
  4,214
  4,399
  4,595
  4,801
  5,020
  5,250
  5,494
  5,750
  6,021
  6,306
  6,606
  6,922
  7,255
  7,605
  7,973
  8,361
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  2,556
  2,603
  2,663
  2,731
  2,808
  2,893
  2,987
  3,088
  3,198
  3,317
  3,444
  3,576
  3,721
  3,876
  4,040
  4,214
  4,399
  4,595
  4,801
  5,020
  5,250
  5,494
  5,750
  6,021
  6,306
  6,606
  6,922
  7,255
  7,605
  7,973
  8,361
Operating income, $m
  299
  309
  316
  324
  333
  344
  355
  367
  380
  394
  410
  430
  447
  466
  485
  506
  529
  552
  577
  603
  631
  660
  691
  723
  758
  794
  832
  872
  914
  958
  1,005
EBITDA, $m
  332
  344
  352
  361
  371
  382
  394
  408
  422
  438
  455
  473
  492
  512
  534
  557
  582
  608
  635
  664
  694
  726
  760
  796
  834
  874
  915
  959
  1,006
  1,054
  1,106
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  11
  12
  13
  14
  16
  17
  18
  19
Earnings before tax, $m
  300
  309
  316
  324
  333
  343
  354
  365
  378
  392
  407
  426
  443
  461
  481
  501
  523
  545
  570
  595
  622
  650
  680
  712
  745
  780
  817
  856
  897
  940
  985
Tax expense, $m
  86
  83
  85
  87
  90
  93
  95
  99
  102
  106
  110
  115
  120
  125
  130
  135
  141
  147
  154
  161
  168
  176
  184
  192
  201
  211
  221
  231
  242
  254
  266
Net income, $m
  214
  225
  231
  236
  243
  250
  258
  267
  276
  286
  297
  311
  324
  337
  351
  366
  381
  398
  416
  434
  454
  475
  497
  520
  544
  570
  597
  625
  655
  686
  719

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  100
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,380
  1,306
  1,336
  1,370
  1,409
  1,451
  1,498
  1,549
  1,605
  1,664
  1,728
  1,796
  1,869
  1,947
  2,029
  2,117
  2,210
  2,308
  2,412
  2,521
  2,637
  2,760
  2,888
  3,024
  3,168
  3,318
  3,477
  3,644
  3,820
  4,005
  4,200
Adjusted assets (=assets-cash), $m
  1,280
  1,306
  1,336
  1,370
  1,409
  1,451
  1,498
  1,549
  1,605
  1,664
  1,728
  1,796
  1,869
  1,947
  2,029
  2,117
  2,210
  2,308
  2,412
  2,521
  2,637
  2,760
  2,888
  3,024
  3,168
  3,318
  3,477
  3,644
  3,820
  4,005
  4,200
Revenue / Adjusted assets
  2.230
  2.230
  2.230
  2.231
  2.230
  2.231
  2.230
  2.230
  2.229
  2.230
  2.230
  2.231
  2.230
  2.230
  2.230
  2.230
  2.230
  2.230
  2.230
  2.230
  2.230
  2.230
  2.230
  2.230
  2.230
  2.230
  2.230
  2.230
  2.230
  2.230
  2.230
Average production assets, $m
  471
  480
  492
  504
  518
  534
  551
  570
  590
  612
  636
  661
  688
  716
  747
  779
  813
  849
  887
  928
  970
  1,015
  1,063
  1,113
  1,165
  1,221
  1,279
  1,341
  1,406
  1,474
  1,545
Working capital, $m
  301
  204
  209
  214
  220
  227
  234
  242
  250
  260
  270
  280
  292
  304
  317
  330
  345
  360
  376
  394
  412
  431
  451
  472
  494
  518
  543
  569
  596
  625
  656
Total debt, $m
  0
  5
  11
  18
  26
  35
  44
  55
  66
  78
  91
  105
  119
  135
  152
  170
  189
  208
  230
  252
  275
  300
  326
  354
  383
  414
  446
  480
  515
  553
  593
Total liabilities, $m
  259
  265
  271
  278
  286
  295
  304
  315
  326
  338
  351
  365
  379
  395
  412
  430
  449
  468
  490
  512
  535
  560
  586
  614
  643
  674
  706
  740
  775
  813
  853
Total equity, $m
  1,120
  1,041
  1,065
  1,092
  1,123
  1,157
  1,194
  1,235
  1,279
  1,326
  1,377
  1,432
  1,490
  1,552
  1,617
  1,687
  1,761
  1,839
  1,922
  2,010
  2,102
  2,199
  2,302
  2,410
  2,525
  2,645
  2,771
  2,904
  3,045
  3,192
  3,347
Total liabilities and equity, $m
  1,379
  1,306
  1,336
  1,370
  1,409
  1,452
  1,498
  1,550
  1,605
  1,664
  1,728
  1,797
  1,869
  1,947
  2,029
  2,117
  2,210
  2,307
  2,412
  2,522
  2,637
  2,759
  2,888
  3,024
  3,168
  3,319
  3,477
  3,644
  3,820
  4,005
  4,200
Debt-to-equity ratio
  0.000
  0.000
  0.010
  0.020
  0.020
  0.030
  0.040
  0.040
  0.050
  0.060
  0.070
  0.070
  0.080
  0.090
  0.090
  0.100
  0.110
  0.110
  0.120
  0.130
  0.130
  0.140
  0.140
  0.150
  0.150
  0.160
  0.160
  0.170
  0.170
  0.170
  0.180
Adjusted equity ratio
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  214
  225
  231
  236
  243
  250
  258
  267
  276
  286
  297
  311
  324
  337
  351
  366
  381
  398
  416
  434
  454
  475
  497
  520
  544
  570
  597
  625
  655
  686
  719
Depreciation, amort., depletion, $m
  33
  35
  36
  37
  37
  39
  40
  41
  42
  44
  45
  43
  45
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
  73
  76
  80
  84
  88
  92
  96
  101
Funds from operations, $m
  203
  260
  266
  273
  280
  289
  298
  308
  318
  330
  342
  355
  369
  384
  400
  417
  435
  454
  474
  495
  517
  541
  566
  592
  620
  649
  680
  713
  747
  782
  820
Change in working capital, $m
  -23
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
Cash from operations, $m
  226
  520
  262
  268
  274
  282
  290
  300
  310
  321
  332
  344
  357
  372
  387
  403
  420
  438
  458
  478
  499
  522
  546
  571
  598
  626
  655
  686
  719
  754
  790
Maintenance CAPEX, $m
  0
  -31
  -31
  -32
  -33
  -34
  -35
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -92
  -96
New CAPEX, $m
  -114
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -20
  -22
  -23
  -25
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -53
  -55
  -58
  -61
  -65
  -68
  -72
Cash from investing activities, $m
  -126
  -41
  -42
  -45
  -47
  -50
  -52
  -55
  -57
  -61
  -63
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -94
  -98
  -104
  -108
  -113
  -119
  -126
  -131
  -138
  -145
  -153
  -160
  -168
Free cash flow, $m
  100
  479
  219
  223
  227
  232
  238
  245
  252
  260
  269
  277
  287
  298
  310
  322
  335
  349
  364
  380
  396
  414
  432
  452
  472
  494
  517
  541
  567
  594
  622
Issuance/(repayment) of debt, $m
  0
  5
  6
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
Issuance/(repurchase) of shares, $m
  -41
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -41
  5
  6
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
Total cash flow (excl. dividends), $m
  60
  484
  225
  230
  235
  241
  248
  255
  263
  272
  282
  291
  302
  314
  326
  340
  354
  369
  385
  402
  420
  438
  458
  479
  502
  525
  549
  575
  603
  631
  661
Retained Cash Flow (-), $m
  -93
  -21
  -24
  -27
  -31
  -34
  -37
  -41
  -44
  -47
  -51
  -54
  -58
  -62
  -66
  -70
  -74
  -78
  -83
  -87
  -92
  -97
  -103
  -108
  -114
  -120
  -127
  -133
  -140
  -147
  -155
Prev. year cash balance distribution, $m
 
  100
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  563
  201
  202
  204
  207
  210
  215
  219
  225
  231
  237
  244
  252
  261
  270
  280
  291
  302
  314
  327
  341
  356
  371
  387
  405
  423
  442
  462
  484
  506
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  540
  184
  176
  168
  160
  153
  145
  137
  129
  121
  112
  104
  96
  88
  79
  71
  63
  56
  48
  42
  35
  30
  24
  20
  16
  12
  9
  7
  5
  4
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

The Jean Coutu Group (PJC) Inc., together with its subsidiaries, engages in the retail of pharmaceutical, parapharmaceutical, and other products in Canada. It operates through two segments, franchising and generic drugs. The company operates franchised drugstores under the PJC Jean Coutu, PJC Clinique, PJC Jean Coutu Santé, and PJC Jean Coutu Santé Beauté names. As of February 27, 2016, it operated a network of 417 franchised stores in Quebec, New Brunswick, and Ontario. The company also operates two distribution centers and provides services to franchised stores. In addition, the company, through its subsidiary, Pro Doc Ltd, manufactures and sells generic drugs to wholesalers and pharmacists. Further, it leases and rents lands and buildings. The Jean Coutu Group (PJC) Inc. was founded in 1969 and is headquartered in Varennes, Canada.

FINANCIAL RATIOS  of  Jean Coutu Group (PJC) Inc. (The) Class (PJC-A)

Valuation Ratios
P/E Ratio 17.5
Price to Sales 1.3
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 16.5
Price to Free Cash Flow 33.4
Growth Rates
Sales Growth Rate 1.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 18.8%
Cap. Spend. - 3 Yr. Gr. Rate 25.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 15.7%
Ret/ On Assets - 3 Yr. Avg. 22.4%
Return On Total Capital 19.9%
Ret/ On T. Cap. - 3 Yr. Avg. 28.2%
Return On Equity 19.9%
Return On Equity - 3 Yr. Avg. 28.4%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 21.7%
Gross Margin - 3 Yr. Avg. 21.8%
EBITDA Margin 11.7%
EBITDA Margin - 3 Yr. Avg. 14.5%
Operating Margin 10.5%
Oper. Margin - 3 Yr. Avg. 10.7%
Pre-Tax Margin 10.5%
Pre-Tax Margin - 3 Yr. Avg. 13.4%
Net Profit Margin 7.5%
Net Profit Margin - 3 Yr. Avg. 10.4%
Effective Tax Rate 28.7%
Eff/ Tax Rate - 3 Yr. Avg. 23.8%
Payout Ratio 38.3%

PJC-A stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PJC-A stock intrinsic value calculation we used $2855 million for the last fiscal year's total revenue generated by Jean Coutu Group (PJC) Inc. (The) Class . The default revenue input number comes from 2016 income statement of Jean Coutu Group (PJC) Inc. (The) Class . You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PJC-A stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for PJC-A is calculated based on our internal credit rating of Jean Coutu Group (PJC) Inc. (The) Class , is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Jean Coutu Group (PJC) Inc. (The) Class .
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PJC-A stock the variable cost ratio is equal to 89.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for PJC-A stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Jean Coutu Group (PJC) Inc. (The) Class .

Corporate tax rate of 27% is the nominal tax rate for Jean Coutu Group (PJC) Inc. (The) Class . In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PJC-A stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PJC-A are equal to 16.5%.

Life of production assets of 15.3 years is the average useful life of capital assets used in Jean Coutu Group (PJC) Inc. (The) Class operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PJC-A is equal to 7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1120 million for Jean Coutu Group (PJC) Inc. (The) Class - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 178.008 million for Jean Coutu Group (PJC) Inc. (The) Class is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Jean Coutu Group (PJC) Inc. (The) Class at the current share price and the inputted number of shares is $3.6 billion.


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Stock chart of PJC-A Financial statements of PJC-A
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